This week in finance was quite the roller coaster! Inflation in the U.S. came in lower than expected, and stocks in China had their best week since 2008. In this article, you will be taken through the main events that shaped the week, together with how such changes may trickle down to our daily lives.

What Happened with Inflation?

However, what the US Federal Reserve cares about is inflation, because that touches everything from groceries you buy at the supermarket to interest rates. This week, PCE inflation fell to 2.2%. Now that’s a big drop! When it is low, inflation makes an easier case for lowering the federal funds rate for the Federal Reserve to fuel the economy.

Imagine that you want to buy a new bike. If interest rates are low, you can borrow money from the bank for an inexpensive price. This will lead you and many others to spend more, which is great for businesses. Low interest can encourage people to spend more-healthy economy booster.

Stock Market of China Skyrockets

While inflation news was great for the U.S., things were more exciting for Chinese stocks. They had a great week, marking performance since 2008! The Shanghai Composite Index, which tracks the performance of stocks in China, surges up by 2.9%. It saw nearly 10% rise overall in the week. The CSI 300, which is an important index, went up by 4.5%.

So what’s driving investor euphoria? The Chinese government and its central bank are announcing new policies to stimulate the economy. In other words, the People’s Bank of China lowered its borrowing costs and made it easier to buy a house. People with more money available work to the advantage of businesses, which is glorious news for every soul!

What Does This Mean for Global Markets?

The excitement in China spilled over from Asia to Europe. The Stoxx 600, an index of many European companies, rose 0.2 per cent and touched an all-time high. The Germany’s Dax and France’s CAC 40, were up 0.6 per cent and 0.3 per cent respectively, followed by Britain’s FTSE 100, which rose by 0.4 per cent.

The economic plans that China has to offer have made investors more optimistic regarding companies operating in the country and those that sell their products there. All this suggests that companies selling metals and minerals, such as Glencore and Rio Tinto, could see increased demand from the Chinese economy, which is taking off at a rapid pace.

Companies Feeling the Boost

Not all companies are doing great, but some are still benefiting from the increase in stocks in China. Just this week, shares of one of the top fashion houses, Burberry, soared 16%. Why? Chinese consumers always go for Burberry, which may increase their spending when they have some more cash to burn on stylish clothing.

Burberry hasn’t had the best of years, but some news this week really gave it a lift. Investors expect as much as the Chinese economy will grow, with similar inputs in its sales.

Japanese Yen: A Bounce Back

Japan news: A new prime minister there made a difference too! The yen, Japan’s currency, had been declining and now returned by 1.4% against the dollar. The Nikkei index, a point of measurement for the Japanese stock, increased to a 2.3% gain. Such improvements can matter, because it strengthens the yen by making Japanese goods inexpensive for other countries, which helps an economy grow.

Anxiety over Stimulus Measures

There are many excited experts at the same time. As we have known, the Chinese government is always good at implementing an economic plan within the shortest period. However, no one is able to confirm whether that policy would be successful or not. Mould commented: “It is all fine and good, but one should know whether in the long run those measures will help the economy or not.”.

In the past, China has merely thrown money at problems without any long-term results. So while investors are optimistic, they also have to watch how these stimulus measures play out.

Local Impact: How This Affects Us

You may be asking, “How does this all impact me?” Well, when inflation drops, and interest rates are lower, it can affect many things in our daily lives. For example:

Therefore, if you are in your plans to buy a house, lower interest rates mean you can afford to pay for a bigger mortgage that comes in handy for the first-time buyer. Whenever you go shopping, with lower inflation, prices may not ascend that rapidly, which will save you some money on buying groceries or clothes. Companies may hire more people anytime their profits go up.